City mulls tweaked deal for DT East parcel

Above: The McClellan Block, formerly owned by the Star Tribune, where the parking ramp will be built.

City leaders are mulling a new deal with Ryan Companies allowing the company to develop a key parcel of land in downtown, a week after the Minnesota Vikings offered the city more money for the opportunity.

Ryan would pay the city $3 million for the right to build apartments beside a new parking ramp near the Vikings stadium -- far less than the $5.6 million they had promised in a competitive bidding process. The parcel in question is tucked beside a parking ramp needed for the Vikings stadium, which is being financed partly through city debt.

The deal has changed since a committee discussion last week. New terms presented to a City Council committee Wednesday would allow the city to buy the parcel back if Ryan does not deliver a project within a certain timeline. It also makes $1 million of Ryan's payment reliant on the building's completion, rather than the 70 percent occupancy outlined in an earlier deal.

"Now we are getting that money as soon as the building is up and the certificate of occupancy is issued," said council member Jacob Frey, who represents the area. "That's not a minor change. That's pretty serious."

Ryan's initial proposal, which included both a hotel and apartments, fell through largely due to disputes over parking.

Ryan had hoped to use some of the 1,600 spots in the parking ramp for its residents, but the Minnesota Sports Facilities Authority said this was not legally possible. Its subsequent hopes to build an additional level of parking on the ramp to house 200 parking stalls met some resistance from the Vikings, who are worried about the traffic impeding fans on game days.

"That egress would account for approximately 30 seconds of additional time," Frey said. "So to get additional economic development, to have eyes on the park, to generate tax revenue, [the Vikings] would not allow 30 seconds."

When Ryan returned to the council to modify its initial offer, the Vikings stepped in with a last-minute $4.6 million offer to build a residential, retail and media tower on the site.

The new terms say that Ryan has 180 days to submit a proposal when the additional parking level is approved or by December 31, 2015 -- whichever occurs sooner. If they do not, the city get the property back for $1.6 million, which reimburses Ryan for extra costs to modify the ramp for development purposes.

The deal remains reliant on the additional parking level being approved. But last week, authority chair Michele Kelm-Helgen was optimistic the issue could be resolved. The authority will eventually own the ramp.

"The Vikings were saying we think it will inhibit our exit times for those 10 games," Kelm-Helgen said at the time. "The authority was very clear that from our perspective we were not concerned about that."

The usage of the parking ramp is also significant, since the city is relying on that revenue to pay off the $62 million in debt issued for the ramp and nearby park. Ryan has guaranteed against any shortfalls for the first 10 years, however.

"It is kind of a parking house of cards because its using parking revenue and parking revenue bonds in order to pay off the bonds to do all these other things," said Council Member Lisa Goodman. But she was confident the ramp will be well used, citing Vikings attendance figures and the new Wells Fargo campus across the street.

The reliance on parking revenues in an area where the city hopes to discourage driving was concerning for council member Lisa Bender. "I'm one of these people that hope people will drive less in the future," Bender said.

"My view is this is the best deal that we can get from Ryan," city staffer Miles Mercer told the committee. "And I think that the Ryan team is the best team to pull off this development."

A final vote on the matter is expected on Friday.

Term Sheet Ryan